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Global M&M companies like BHP, Rio Tinto, Anglo American, Vale and others are much more conservative regarding true innovative R&D activities. They focus mostly on operational improvement initiates across core business value chain with low investment requirements, low risk and short payback (often within the first year of implementation). Moreover, solutions often sourced through available on the market commercially ready products. Experiments with corporate venture funds are getting less and less popular given success rate of previous endeavours.
Why major leaders decided not to focus on long-term innovation with high risk - high return profile? At Peers Consulting we have recently conducted innovation approach study for our client, talked with many global subject matter experts in this field. We see following main reasons:
1. Public status – prioritisation of short-term shareholder return (TSR) over long-term high risk high potential innovation opportunities
2. Not favourable macro context – expensive debt, decline of commodity prices (Nickel, PGM, etc.)
3. Lack of government support – limited long-term financing programs for innovative R&D activities
4. Limited R&D infrastructure – national laboratories, PhD programs in relevant areas, etc.
5. Not successful previous experience – downstream integration, CVC, etc.
What do you think are the long-term consequences of majors' approach to innovation? Will it have positive or negative impact on TSR long-term?
